After Friday's return to form, the Euro has kicked off the week in a consolidative manner, with little in the way of new directives to encourage fresh buying. The EURUSD pair fell to lows of 1.2340 in early Europe, before regaining ground over the course of trading with support from U.S markets promoting buoyancy across risk related assets. European equities also continued to find form with the EURO STOXX 50 index finishing the day with a healthy 1.13 percent gain. Moderate support for peripheral debt markets suggested some residual positivity in the wake of ECB President Mario Draghi's proposed bond buying scheme, with support for shorter term maturities promoting demand across the curve. While Draghi noted short-term maturities will be the primary focus of debt market intervention, there remains an element of blind faith given little else is known on the finer points, including the scale of intervention and if indeed countries such as Spain will be willing to forgo their fiscal sovereignty in exchange for financial support.  Although we seen a marked change from Spanish Prime Minister Mariano Rajoy, who had previously been opposed to a sovereign bailout, Rajoy will now wait for the finer points of the proposed intervention program before deciding if financial assistance is worth the risk to Spain's fiscal sovereignty. Across the Atlantic, U.S equities found some post-jobs data support, while relative stability in Europe boosted sentiment. The DOW and S&P500 close a moderate 0.16 and 0.23 percent higher on the day.

The Aussie dollar followed the Euro's lead with a mild downturn early in European trade reversing as the session drew to a close. with the AUDUSD pair forging a new 4 ½ month high just shy of 106 US cents. Nevertheless, we are seeing healthy levels of consolidation across the risk spectrum including the Aussie dollar, with little in the way of major directives to spark new capital flows.

Key to the Aussie dollar's fortunes today will be the RBA policy decision at 2.30 AEST, which is widely expected to official interest rates remain on hold at 3.5 percent. Despite the persistent threat of 'Euro-geddon', on balance local conditions have been supportive, with a recent string of better-than-expected economic feedback likely to see Stevens and Co hold the cash rate steady, and maintain their 'glass half full' stance. Last week's data showed promising signs of a housing recovery with new home sales, building approvals, and house prices outpacing expectations, while retail sales activity also rose beyond expectations. While it's true subdued inflationary pressures may provide ample breathing space, barring an abrupt south-bound shift in global conditions, it's unlikely the board will take rates deeper into accommodative territory in the near-term. Yesterdays TD Securities inflation gauge confirmed price pressures remain subdued with a rise of 0.2 percent in July, despite the introduction of the carbon tax. The annual rate of inflation is at 1.5 percent according to the release which places the RBA in a comfortable position to further relax policy if required. Less-than-inspiring local employment conditions remain an exception to the overall buoyancy seen from other macro releases, with June's statistics showing losses of 27,000 jobs with the official unemployment rate ticking higher to 5.2 percent. This week's employment report is expected to see the Australian economy create 10,000 new jobs with the official unemployment rate to edge higher once again from 5.2 to 5.3 percent.

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